Bidding on a HUD home
In order to submit an offer on a HUD home, there are a few things you should know.
You can view the Property Condition Report on HUD homes for sale here. Find the home you’re interested in by filling in the state and street name. You can also search by city or county. Select the Addendums then Property Condition Report. This will show you the items that must be repaired for financing.
Use FHA financing for HUD Home — this allows the lender to use the HUD appraisal and include escrow items in the loan amount. Then, repairs can be completed after closing and the lender will pay the contractor for the repairs. This saves you approximately $350 for a new appraisal. HUD also offers special financing for HUD owned homes — $100 down FHA loans. This is also available on the FHA 203K loans which allows additional money to be added to the loan for renovations. On the FHA 203K loan, a new appraisal is required.
HUD homes are sold “as is” with no repairs by seller. HUD will not do lender required repairs so do consider FHA financing when buying a HUD home. Otherwise, you may get in a situation where you can’t get a loan approval because of a repair that the lender requires.
The home inspection must be completed in 15 days of contract acceptance. You will get a form to complete and submit to Field Services to obtain approval to activate utilities. There is a fee of approximately $150 to Field Services. The buyer turns on utilities in their name for 5 days. Field Services will give written approval for the turn on and off dates. During the winter months, the fee is to de-winterize and re-winterize the home after the inspection, so the fee is not refunded. During the summer, that fee may be waived or refunded if home is not damaged during the inspection.
If the closing cannot be done on time (45 days for financing and 30 for cash closings), there is a fee of $375 to extend the contract for 15 days. This is typically refunded at closing for the first extension but additional extensions are usually not refunded. Make sure a refund is requested when the extension form is submitted.
On the attachment from the asset manager when the signed contract is returned, there is a list of people to contact for contract issues. Your agent should be able to handle specific requests but should call the listing agent if assistance is needed.
Buying a HUD home is a different process but you can get a great deal when buying a HUD home. Be patient and ask a lot of questions so you won’t have any surprises along the way. I am a HUD listing agent and will be happy to answer any questions… or help you find the answers.